nep-gth New Economics Papers
on Game Theory
Issue of 2014‒12‒08
eleven papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Beatable Imitation in Symmetric Games with Perturbed Payoffs By Tsakas, Nikolas
  2. Balanced collective contributions, the equal allocation of non-separable costs and application to data sharing games By Sylvain Béal; Marc Deschamps; Philippe Solal
  3. On the restricted cores and the bounded core of games on distributive lattices By Michel Grabisch; Peter Sudhölter
  4. Multicoalitional solutions By Stéphane Gonzalez; Michel Grabisch
  5. Local coordination and global congestion in random networks By Iván Arribas; Amparo Urbano Salvador
  6. Bargaining in Bilateral Oligopoly: An Alternating Offers Representation of the "Nash-in-Nash" Solution By Allan Collard-Wexler; Gautam Gowrisankaran; Robin S. Lee
  7. Contagious herding and endogenous network formation in financial networks By Georg, Co-Pierre
  8. Social Investments, Informal Risk Sharing, and Inequality By Attila Ambrus; Arun G. Chandrasekhar; Matt Elliott
  9. Voluntary Contributions to the Establishment and Operation of Public Goods: Theory and Experimental Evidence By Arbel, Yuval; Bar-El, Ronen; Schwarz, Mordechai E.; Tobol, Yossi
  10. Addiction and Network Influence By Michal Ksawery Popiel
  11. A Search-Theoretic Approach to Efficient Financial Intermediation By Fabien Tripier

  1. By: Tsakas, Nikolas
    Abstract: In a recent paper, Duersch (2012) showed that in a rather broad class of repeated symmetric two-player games, a player who uses the simple "imitate-if-better" heuristic cannot be subject to a money pump. In this paper, we extend the analysis to games with randomly perturbed payoffs and we show that this result is not robust to, even arbitrarily small, payoff perturbations. In particular, we provide a necessary and sufficient condition that characterizes the class of perturbed games in which the imitator can be subject to a money pump.
    Keywords: Imitate-if-better, Repeated Games, Symmetric Games, Relative Payoffs, Robustness, Perturbations.
    JEL: C72 C73
    Date: 2014–06–12
  2. By: Sylvain Béal (CRESE, Université de Franche-Comté); Marc Deschamps (Université de Lorraine, BETA (CNRS 7522) and GREDEG (CNRS UMR 7321)); Philippe Solal (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne)
    Abstract: The axiom of Balanced collective contributions is introduced as a collective variant of the axiom of Balanced contributions proposed by Myerson (1980). It requires that the identical average impact of the withdrawal of any agent from a game on the remaining population. It turns out that Balanced collective contributions and the classical axiom of Efficiency characterize the equal allocation of non-separable costs, an allocation rule which is extensively used in cost allocation problems and in accounting. For instance, the equal allocation of non-separable costs coincides with the Nucleolus on the class of data sharing games within the European REACH legislation. While our result does not hold on data sharing games, we provide comparable characterizations of the equal allocation of non-separable costs and the Shapley value.
    Keywords: Balanced collective contributions, Balanced contributions, Equal allocation of non-separable costs, Shapley value, Data games.
    JEL: C71 D71 K32 L65
    Date: 2014–08
  3. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Peter Sudhölter (University of Southern Denmark - Department of Business and Economics and COHERE)
    Abstract: A game with precedence constraints is a TU game with restricted cooperation, where the set of feasible coalitions is a distributive lattice, hence generated by a partial order on the set of players. Its core may be unbounded, and the bounded core, which is the union of all bounded faces of the core, proves to be a useful solution concept in the framework of games with precedence constraints. Replacing the inequalities that define the core by equations for a collection of coalitions results in a face of the core. A collection of coalitions is called normal if its resulting face is bounded. The bounded core is the union of all faces corresponding to minimal normal collections. We show that two faces corresponding to distinct normal collections may be distinct. Moreover, we prove that for superadditive games and convex games only intersecting and nested minimal collection, respectively, are necessary. Finally, it is shown that the faces corresponding to pairwise distinct nested normal collections may be pairwise distinct, and we provide a means to generate all such collections.
    Keywords: game theory; restricted cooperation; distributive lattice; core; extremal rays; faces of the core
    Date: 2014–06
  4. By: Stéphane Gonzalez (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The paper proposes a new concept of solution for TU games, called multicoalitional solution, which makes sense in the context of production games, that is, where v(S) is the production or income per unit of time. By contrast to classical solutions where elements of the solution are payoff vectors, multicoalitional solutions give in addition an allocation time to each coalition, which permits to realize the payoff vector. We give two instances of such solutions, called the d-multicoalitional core and the c-multicoalitional core, and both arise as the strong Nash equilibrium of two games, where in the first utility per active unit of time is maximized, while in the second it is the utility per total unit of time. We show that the d-core (or aspiration core) of Benett, and the c-core of Guesnerie and Oddou are strongly related to the d-multicoalitional and c-multicoalitional cores, respectively, and that the latter ones can be seen as an implementation of the former ones in a noncooperative framework.
    Keywords: Cooperative game; core; aspiration core; strong Nash equilibrium
    Date: 2013–08
  5. By: Iván Arribas (ERI-CES, University of Valencia, Ivie); Amparo Urbano Salvador (ERI-CES, University of Valencia)
    Abstract: This paper analyzes the impact of local and global interactions on individuals' action choices. Players are located in a network and interact with each other with perfect knowledge of their neighborhood and probabilistic knowledge of the complete network topology. Each player chooses an action, from some finite set, which imposes an externality on their neighbors as well as an externality on the complete network. Players deal with two opposing forces: they obtain utility from sharing their choices with their neighbors (positive local externality) but suiter disutility from sharing the same choice with all members of the network (negative global externality). Economic and social phenomena exhibiting these features are: the adoption of cost-reducing innovations, clusters of firms, time schedule choices, the adoption of subcultures and fads, among others. We find the conditions for the existence of all symmetric Bayesian Nash equilibria and translate them to a characterization in terms of the main properties of the network topol- ogy. The balance between local satisfaction and global dissatisfaction partially explains the equilibrium outcome. The players who finally decide on the type of equilibria are those that are either highly connected (hubs) or poorly connected (peripherals) to the others. On the one hand, hubs try to coordinate their action choices and on the other, peripherals are only worried about congestion and play the least selected actions of the network. Some examples illustrate our main results. As a by-product we also show the failure of symmetric
    Keywords: Random Network, Externalities, Action Selection, Bayesian Nash equilibria.
    JEL: C72 D71 D85 H40 R41
    Date: 2014–11
  6. By: Allan Collard-Wexler; Gautam Gowrisankaran; Robin S. Lee
    Abstract: The concept of a Nash equilibrium in Nash bargains, proposed in Horn and Wolinsky (1988), has become the workhorse bargaining model for predicting and estimating the division of surplus in applied analysis of bilateral oligopoly. This paper proposes a non-cooperative foundation for this concept—in which agreements between each pair of firms maximizes their bilateral Nash product conditional on all other negotiated agreements—by extending the Rubinstein (1982) alternating offers model to a setting with multiple upstream and downstream firms. In our model, downstream firms make simultaneous offers to upstream firms in odd periods, and upstream firms make simultaneous offers to downstream firms in even periods. Given restrictions on underlying payoffs, we prove that there exists a perfect Bayesian equilibrium with passive beliefs that generates the "Nash-in-Nash" solution, and that this equilibrium outcome is unique.
    JEL: C78 D43 L13
    Date: 2014–10
  7. By: Georg, Co-Pierre
    Abstract: When banks choose similar investment strategies, the financial system becomes vulnerable to common shocks. Banks decide about their investment strategy ex-ante based on a private belief about the state of the world and a social belief formed from observing the actions of peers. When the social belief is strong and the financial network is fragmented, banks follow their peers and their investment strategies synchronize. This effect is stronger for less informative private signals. For endogenously formed interbank networks, however, less informative signals lead to higher network density and less synchronization. It is shown that the former effect dominates the latter. JEL Classification: G21, C73, D53, D85
    Keywords: endogenous nancial networks, multi-agent simulations, social learning, Systemic risk
    Date: 2014–07
  8. By: Attila Ambrus; Arun G. Chandrasekhar; Matt Elliott
    Abstract: This paper studies costly network formation in the context of risk sharing. Neighboring agents negotiate agreements as in Stole and Zwiebel (1996), which results in the social surplus being allocated according to the Myerson value. We uncover two types of inefficiency: overinvestment in social relationships within group (e.g., caste, ethnicity), but underinvestment across group. We find a novel tradeoff between efficiency and equality. Both within and across groups, inefficiencies are minimized by increasing social inequality, which results in financial inequality and increasing the centrality of the most central agents. Evidence from 75 Indian village networks is congruent with our model.
    JEL: C78 D31 D61 D86 L14 Z13
    Date: 2014–11
  9. By: Arbel, Yuval (School of Business, Carmel Academic Center); Bar-El, Ronen (Open University of Israel); Schwarz, Mordechai E. (Open University of Israel); Tobol, Yossi (Jerusalem College of Technology (JTC))
    Abstract: We study the dynamics of the private provision of a public good that requires both capacity buildup and ongoing operating costs. We show that setting a time limit for the collection of contributions dedicated to capacity buildup minimizes the utility loss at the Nash equilibrium. We test the theoretical model empirically by conducting contribution game experiments with religious Jewish students for the procurement of sustainable supplies for their campus synagogues and ongoing operations. The empirical findings support the model's prediction and demonstrate that the theory fairly describes the pattern of contributions when the group of contributors attributes high intrinsic value to the public good. More specifically, we find that total contributions increase over time, contributions to the capacity buildup increase with the time limit and with the number of contributors, and contributions to the capacity buildup decrease with ongoing operating costs. Additionally, we determine that gender and culture affect the pattern of contributions. We also find that individuals prefer to contribute to sustainable supplies, rather than to their ongoing operations. Our paper has practical implications for the financing of public goods through voluntary provisions.
    Keywords: differential games, experiment, public goods, voluntary provision
    JEL: C73 C91 C92 H41
    Date: 2014–10
  10. By: Michal Ksawery Popiel (Queen's University)
    Abstract: Social networks are an important component in understanding the decision to consume addictive substances. They capture the role of limited access, peer influence, and social acceptance and tolerance. However, despite the empirical evidence of their role, they have been absent from theoretical models. This paper proposes a mechanism through which agents can influence each other in their decision to consume an addictive good. An agent's decision is sensitive to her state of addiction as well as to the composition of her neighbourhood. The model is consistent with the empirical evidence that peer influence can work in both ways: influencing an individual to use and helping them to quit. The structure of the network has important implications on the outcome of agents' decisions as well as the effectiveness of policies aimed at limiting use of addictive substances through deterrence. I provide a network-based explanation of why usage rates can vary across otherwise similar agents and show how in some situations encouraging network ties can lead to lower use while in others it can have the opposite effect. Furthermore, I explore the effect of networks on diffusion of addiction and, using simulations, find that addiction spreads faster in an environment where there are few strong links than in one with many weak links.
    Keywords: addiction, dual-self, networks, random utility
    JEL: C70 D01 I18
    Date: 2014–11
  11. By: Fabien Tripier
    Abstract: This article develops a search-theoretic model of financial intermediation to study the efficiency condition of the banking sector. Competitive financial intermediation is determined by the search decisions of both households (to find adequate financial products) and banks (to attract depositors through marketing and to select borrowers through auditing) and by the interest rate setting mechanism. The efficiency of the competitive economy requires that interest rates are posted by banks or are bargained under a specific Hosios (1990) condition, which addresses the hold-up problem induced by search frictions on the credit and deposit markets. Interbank market frictions are introduced to show how an interbank market crisis leads to inefficient financial intermediation characterized by credit rationing and high net interest margin.
    Keywords: Banking;Search;Search;Matching;Switching Costs;Efficiency
    JEL: C78 D83 G21
    Date: 2014–11

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